Pierre Trudeau once said, in reference to our American neighbours, “Living next to you is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt.”
Certainly, along with many other things, we share a financial bed. When the elephant rolls in a wakeful night, we will feel it.
The US heads toward an election this November, and the number one concern in the Obama-Romney choice for president is which man can solve their economic woes. Neither candidate seems to possess magical answers. There’s a reason for this: there are no magical answers. The US is in the most difficult financial situation in its history, one not likely to be repaired by just tweaking and tinkering. While Canada holds an enviable position in a shaky economic world, we are certainly not immune to the US plight, and we will feel the effects of their struggle more than we will feel that of the European community.
It’s hard for us to appreciate the US debt situation. No doubt the man on the street identifies economic trouble mainly by the loss of his job or that of his neighbour, or by the escalating cost of buying gas or groceries. Curiously, fingers point at Europe and its debt crises, and attention seems to be diverted from the US mess. Perhaps the world has developed such a belief in America as a “superpower” that they scrounge up faith that somehow, miraculously, Americans will easily find their way out of this jam.
The US Government debt now is in the area of $15.9 trillion plus, and rising so fast that if you look at one of the several “debt clocks” online, the eye cannot actually see digits smaller than thousands of dollars as they flash past. You can see one of these clocks at usdebtclock.org. Give it a moment for all the many figures to appear. We’ll ignore the Whole Debt figure (which takes in all federal debt, personal debt, bank debt, corporation debt, state and municipal debt) that rolls at about $57 Trillion and climbing. Dealing with the Federal Government debt provides enough of a shocker.
The enormity of the figures is a good reason that people aren’t as concerned as they might be—we just can’t fully comprehend the numbers!
A million dollars, which doesn’t buy what it once did, has seven digits: a one and six zeros. A billion dollars (just a little more than what our government spent on the last G20 conference in Canada) is a thousand of those, and features nine zeros. A trillion dollars adds another three zeros, something almost imaginable, but we have to realize that each step upward is in thousands of the previous one: a trillion is a thousand billion, or a million million—in digits it’s $1,000,000,000,000.
Digits alone fail to bring home the reality. To do this, people have turned to descriptive examples of that kind of money in action, or graphics to depict the enormity of the money involved. A popular description of what $15.9 trillion dollars (the American Federal debt) is like uses the following situation: suppose you spent million dollars a day, every day since the time of Christ? You would have spent less than one trillion!
Another way to look at that amount of debt is to break it down to each American citizen, who are really the people who owe the federal debt (a government represents the citizens, and spends in their names). In the US, the citizen/government debt amounts to just over $50,000 for each and every citizen. Since every citizen includes children, the very elderly, and others who may not be presently contributing, a “per taxpayer” figure is more logical: $140,000 each (try adding that on to your 2012 tax bill). This is at a time when apparently ten percent of US citizens are on food stamps!
The US debt was only $16 billion in 1930 when it rose drastically to fight the Depression. It is now a thousand times as much.
If you like graphic images, there are many at this site. On this site they graphically deal with bundles of $100 bills, each bundle about half an inch thick, stacked on normal sized pallets (as used by fork lifts). Imagine a stack of crisp hundred dollar bills, stacked about five feet high on each pallet. It would take ten pallets of bills for one billion dollars. Each pallet would weight about a ton. A trillion dollars would take 10,000 of these pallets of money, or about 10,000 tons of money (twenty million pounds of $100 bills). Their site name suggests they have a political agenda, but I went there only for the graphics.
Dizzy yet? The US federal government requires so much money to run its programs each day, to pay its workers, to pay for its military, its prisons, etc., etc., that it “borrows” almost 40% of this money, increasing the debt every second. In September it will reach another ceiling of what was to be its maximum debt, and another crisis will ensue while it gets permission from Congress to raise the ceiling again. This September ceiling is apparently just above where its debt increase equals its gross product: sort of when a person owes more than he can possibly make, therefore there is no hope of ever paying it back.
Canada? You can also check out the Canadian Debt Clock at www.debtclock.ca. It looks scary as well, ticking along at about the $590 billion dollars mark, with a per citizen load of about $16,950, but that is preferable to the almost $50,000 per citizen load of the Americans.
Those with a quick wit but little economic savvy might suggest, “Why don’t we all just cancel the debts and start over again?” Not quite that easy. About $11 trillion of the US debt is to the public, including about half of that to foreign investors, such as a trillion dollars owed to Chinese investors and a trillion also to Japanese.
This is a hard article to end… I would like to offer my brilliant solution to what most are labelling a mammoth crisis, but I’m no economist, and although those offering advice are legion, easy answers are non-existent. The situation is much like the individual who wakes up after a lost weekend in Vegas with tens of thousands on his Visa, while at home he’s making minimum wage. The way out of the mess is far from easy.
The elephant has run up a very large tab. It would take drastic measures, historic measures, to even manage the interest, while the principal roars upward every second like a shuttle on lift-off. I don’t get the impression that either presidential candidate has the will to make the hard decisions, and even if one of them did, it’s unlikely he would have a congress that would support it. Few of them seem to understand it; half of them don’t believe it; some anticipate they will bully their way out of it.
Cutting up the Visa is a hard task, especially when you’re used to being an elephant.